Commentary on current housing and planning issues

A warning from history

The news that Manchester–based Trafford Housing Trust has taken on £275m of re-financing, partly in order to fund a new partnership with London and Quadrant housing trust (L&Q), is an interesting development for the social housing sector.

L&Q operates in London and the south-east and has no track record of activity elsewhere. Yet under this 50/50 deal, it will invest £80m to build 2,000 homes across the north.

Across the sector dozens of mergers are now under way, partly driven by the government’s 1% social housing rent cut, but all predicated upon the notion that big means better. L&Q recently acquired East Thames Housing to create a new 90,000 home organisation with a £15bn plan to build 100,000 homes.

There’s a danger, though, that mergers are being driven by the ambitions of housing association executives rather than a rational analysis of geography and cultural fit. The new organisations also tend to recruit their board members and executives from within rather than taking a fresh look at the personnel needs of the bigger entity.

In almost every case tenants have been excluded from these merger decisions. The National Housing Federation’s voluntary merger code is a weak document that does not even mention any role for tenants. The notion that big means better is not borne out by the facts. Some of the largest associations have provided the worst service, as highlighted in parliament by Bethnal Green & Bow MP Rushanara Ali, concerned over the service from Circle Housing Group, which has now merged with Affinity Sutton to form a new body called Clarion with 125,000 homes.
These changes come with a warning from history. A century ago there were more than 2,000 mutual building societies. Only about 40 remain today and, apart from the Nationwide, most are small local outfits. Building societies thought they could flourish in the marketplace, but instead they were quickly swallowed up by the banks, their social purpose destroyed.

Similarly, the number of small housebuilders has declined drastically, from 10,000 in 1980 to 2,800 by 2014, while the largest 10 firms have grown in size: in 1960, the top 10 firms built 9% of all homes (pdf). Today they build 47%. This semi-cartel underpins the housing crisis, because it throttles competition and allows the top firms to control land and restrict its development.

There are 1,500 housing associations, but most are very small outfits. I can see a time when the top ten associations could own 90% of the sector’s homes. This will be good neither for tenants nor for the sector as a whole.

There is a danger that the hubris that goes with this aggrandisement will cloud judgment and lead to disaster. Housing associations are still classed as public bodies and their £60bn debt sits on the public balance sheet. Any sector-wide failures could tempt a greedy chancellor to privatise the sector.